TaxTMI 
TaxTMI 
2017 (8) TMI 1179
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....o revise the assessment order for the reason that on examination of assessment records, certain omission and commission were noticed which rendered the assessment order erroneous in so far as it is prejudicial to the interest of the revenue. The CIT, in the said show cause, observed that the A.O has not verified expenses incurred by the assessee towards purchase of TDR of 'Asha Kiran' project and also failed to examine disallowance of interest paid on loans for diversion of interest bearing funds to group concerns without charging any interest. The A.O, without examining the above issues completed assessment, which rendered the assessment order passed by the A.O, erroneous in so far as it is prejudicial to the interest of the revenue. The A.O not only failed to examine the issues, but also failed to apply his mind to the facts of the case, which caused prejudice to the interest of the revenue, therefore opined that the assessment order passed by the A.O needs to be revised u/s. 263 of the Act. 4. In response to show cause notice, the assessee submitted that the assessment order passed by the A.O u/s. 143(3) of the Act, dated 29.12.2011, neither erroneous nor prejudicial to the int....
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....provision of Section 263 are not satisfied to invoke the revisional powers cannot be accepted on the facts and merits of the case. The CIT, further, observed that the assessment order passed by the A.O is brief and cryptic and doesn't contain a single word about examination of the about two issues at the time of assessment. There is no whisper in the assessment order for having called for necessary details, verified the details and applied his mind on the details filed by the assessee before concluded the assessment which rendered the assessment order erroneous in so far as it is prejudicial to the interest of the revenue. 6. In so far as merits of the issues are concerned, the CIT observed that as per the records available on record, the assessee is only a facilitator between the flat owners of 'Asha kiran' and the builder for loading TDR. The agreement for purchase of TDR between M/s. Eversmile Construction Ltd. and M/s. Kamanwala Lakshchandi Todays Developers, indicates that M/s. Kamanwala Lakshchandi Todays Developers has purchased TDR directly from Eversmile Construction Co. Ltd., therefore, there is no merits in the argument of the assessee that it has purchased TDR from M/s....
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....of deduction of interest u/s. 36(1)(iii). The CIT, failed to appreciate that under the agreement, the liability of purchase of TDR and transferring the same to Kamanwala Housing Construction Co. was that of the assessee. In so far as second issue of disallowance of proportionate interest paid on loans, the A.O himself had considered and accepted the fact that the advances given by the assessee company were during the normal course of its business and entirely out of commercial expediency and hence, disallowance of interest is not warranted. The Ld. A.R referring to the show cause notice issued by CIT u/s. 263 of the Act, and order passed by the CIT u/s.263 of the Act, submitted that the CIT issued show cause notice on one issue and passed revision order on different issue which is not permissible u/s. 263 of the Act. The observations of the CIT are contrary to the intention of the parties manifested in the MOU particularly with reference to TDR. As per Clause (c) of the recital and Clause (2)(d) it is clear that arranging TDR was responsibility of the assessee for which total consideration payable was to Rs. 4.5 crores. The CIT, ignoring all the evidences observed that it was not l....
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....ruction Co. has directly purchased TDR from M/s. Eversmile Construction Co. P. Ltd. and also paid consideration for TDR. It was further observed that the MOU between the assessee and M/s. Kamanwala Construction Co. indicates that the assessee is only a facilitator between the flat owners of Asha Kiran and the developer, but all expenses has to be borne by M/s. Kamanwala Construction Co. Ltd. In so far as interest disallowance, even though the audit report clearly specifies that the assessee has advanced interest free loan to its sister concerns, the A.O failed to disallow proportionate interest paid on unsecured loans. The A.O passed assessment order without proper enquiry and also applying his mind which caused prejudice to the interest of the revenue on these two counts. Therefore, the CIT has rightly invoked jurisdiction u/s. 263 to set aside the order passed by the A.O and CIT, order should be upheld. 10. We have heard both the parties, perused the material available on records and gone through the orders of the authorities below. The CIT invoked jurisdiction to revise the assessment order u/s. 263 for the reason that the A.O has not conducted proper enquiry before completion ....
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....ile Construction Co. P. Ltd. and also details of unsecured loans along with confirmations from the parties. The A.O after satisfied with details filed by the assessee, has completed assessment, therefore, the assessment order passed by the A.O cannot be called as erroneous by alleging that there is a lack of enquiry on the part of the A.O for examination of above two issues. 12. Having heard both the sides, we find merits in the arguments of the assessee for the reason that, the A.O had issued show cause notices on various dates and called for necessary details in respect of Asha Kiran project and loan and advances. The assessee has a filed paper book containing details filed before the A.O. On perusal of paper book filed by the assessee, we find that the assessee filed three letters on 16.09.2011, 10.10.2011 and 19.10.2011 and furnished various details in respect of expenditure incurred for TDR purchase as well as interest paid on loans. The assesse has filed copies of MOU between the assessee and M/s. Kamanwala Construction Co. and also agreement for purchase of TDR between M/s. Kamanwala Construction Co. and M/s. Eversmile Construction Co. P. Ltd. On perusal of MOU filed by the....
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.... course its business which has been repaid over a period of time. The assessee further proved that once loan is advanced in the normal course of business out of commercial expediency, then interest cannot be disallowed merely on the ground that the assessee has paid interest on loans. Though, the assessee case squarely covered by the ratio of Hon'ble Supreme Court, in the case of S.A Builder vs CIT (2007) 288 ITR 1, the CIT, ignored the law laid down by the apex court, merely because special leave petition has been admitted in the case of Tulip Star Hotels Ltd. In fact, the Supreme Court, in Hero Cycle P. Ltd. vs CIT (2015) 379 ITR 347 has affirmed the decision of S.A Builders Ltd. (supra), therefore, the law laid down by the Hon'ble Supreme Court still prevails and also binding on lower authorities. The A.O has followed the ratio of the Hon'ble Supreme Court to decide the issue of disallowance of interest which cannot be said to be erroneous and also prejudicial to the interest of the revenue. Therefore, we are of the considered view that the order passed by the A.O is neither erroneous nor prejudicial to the interest of the revenue. 14. The CIT is empowered with suo motto revisi....